In the wake of a food safety crisis that crippled the company, Chipotle shareholders have voted in favor of shaking up the company's board, arguing it is devoid of racial or gender diversity. The concerns were voiced at a company shareholder meeting held in Denver Wednesday morning.
Shareholder activists (those looking to put public pressure on a company's management) failed to unseat two of the board's longtime directors, a move they said was critical to the company's success. A majority did, however, vote in favor of a measure that would give shareholders more power to propose new directors in the future.
"Our basic premise is that it's difficult to conceive of a more significant risk failure than what we've seen at Chipotle," said Michael Pryce-Jones, the director of corporate governance at CtW Investment Group, who attended Wednesday's meeting. In a phone conversation with Eater, Pryce-Jones said the company has "done a lot at the operational level, but not on the governmental side" to deal with the fallout from a string of food safety failures at Chipotle restaurants around the country last year.
The current board (which contains nine members, all of whom are white) has "all the marks of an insular board," Pryce-Jones said, adding that the risk of a lack of diversity is group-think. "A good indication of that is a lack of accountability around their own conduct during the food safety scandal."
CtW and other activist shareholders have recently argued that Chipotle board members failed to draw any lessons from the food safety scandal, as evidenced by the fact that no directors left the board and no new ones were appointed. "We've seen a stock price decline close to that of BP, after the Deepwater Horizon incident, or VW after their emissions scandals," Pryce-Jones said. "For them not to consider board changes, shows a complete lack of awareness."
Shareholders are seeking more diverse board membership, which Pryce-Jones says will "bring different perspectives" and has "been shown to have a good impact on stock performance."
After the meeting, CtW released a statement saying the vote "demonstrated that a significant portion of the investor base had lost faith in the credibility and competency of these board members."
Though the morning meeting centered mainly on board discussions (shareholders were told at the onset the meeting would be finished as quickly as possible), the board did hear from a worker at Taylor Farms, a Chipotle distributor. Taylor Farms workers have recently held protests at a handful of Chipotle stores, hoping to shed light on alleged safety issues at a California plant that prepares produce for the fast-casual chain.
According to those present at the meeting, Chipotle co-chief executive officer Montgomery Moran "seemed genuinely shocked" when told about the safety issues, and said he would look into them further.